Keep calm and carry on: Managing your money during a global virus outbreak

Saturday, 29 February 2020

New Zealand has its first confirmed case of coronavirus, but the impact on the economy, and New Zealanders' money lives remains uncertain.

The contagion had a 'high probability' of reaching New Zealand, Finance Minister Grant Robertson warned on Thursday, and urged businesses to talk to their banks and staff, and put plans in place for managing the impact of the virus.

The country was in the 'shadow of one of the biggest uncertainties that the global economy has seen in recent times', Robertson said.

Money experts Martin Hawes and Hannah McQueen urged people not to panic, and property economist Kelvin Davidson said data had not yet shown virus-related house price impacts.

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* Coronavirus: First case of virus in New Zealand

* Coronavirus: Passenger who shared flight with sufferer self-quarantines

* Symptoms, vaccines, travel advice: What Kiwis need to know​**

YOUR JOB:

'Drought and Coronavirus are going to deal the New Zealand economy a significant blow,' Westpac chief economist Dominick Stephens said, But as yet, a recession is not expected.

'We are now forecasting zero quarterly GDP growth for March quarter, and 2.2 per cent annual GDP growth for 2020,' he said.

Currently, Official Interest Rate cuts to stimulate the economy were not expected until August, but Stephens said: 'This is all predicated on the assumption that Coronavirus is eventually contained.'

If Coronavirus became a pandemic and/or spread to New Zealand, the economic impact would be worse.

Many New Zealand companies are flagging that uncertainty.

On Friday, Tourism Holdings, KiwiRail and TVNZ all flagged uncertainty about the impact of coronavirus on their business.

TVNZ was concerned about the potential for it to hit advertising revenue. Tourism Holdings was worried it would further impact global tourism. KiwiRail was worried freight volumes could fall.

ANZ reported farmers had been hard hit.

The University of Auckland issued a hiring freeze in the face of a travel ban on students from China.

Businesses ability to charge premium prices could also be hit, with Stephens warning of a negative impact on inflation.

Cheaper hotel rooms and petrol were both likely, but some imported goods could get more costly as stocks run low thanks to closures of Chinese factories.

YOUR KIWISAVER

The NZX 20 Index of New Zealand's top 20 biggest listed companies dropped just over 4 per cent between Tuesday and market close on Friday, though it remained very high after a decade-long bull market.

London's FTSE 100 suffered its largest week-long fall since the Global Financial Crisis of a decade ago, but financial adviser Martin Hawes said the falling New Zealand exchange rate had softened the impact on New Zealand investors of market falls in the UK, US and other countries.

Hawes, who advises investors to always keep some emergency money in cash, said he was not going to be panicked into selling investments.

'Sometimes doing nothing is a choice. My choice at the moment is pretty much to do nothing.'

At times like these, Hawes said he fell back on old investment wisdom and sayings.

'The one that comes to mind is 'Don't try to catch a falling knife',' he said.

This phrase refers to not trying to 'time the market' by selling up as markets are falling. Investors were generally bad at choosing when to sell, and when to buy back in.

'Nobody rings a bell at the bottom of the market,' Hawes said.

In troubled times, having a diversified portfolio provided protection, Hawes said.

'I wouldn't like to be someone who only owned Air New Zealand and a couple of tourism shares,' Hawes said.

Sam Stubbs, founder of the Simplicity KiwiSaver scheme, urged KiwiSavers not to shift to lower growth funds in a panic.

'Your best friends in nervous times like these are patience and diversification.

'Most KiwiSaver funds have thousands of investments in many countries. So carry on contributing. Hindsight will show you've invested at sale prices,' he said.

As columnist Janine Starks pointed out, there have been scares like this before, and they have tended to have only a short impact.

YOUR HOUSE:

Coronavirus could impact house prices, but as yet, property economist Kelvin Davidson from Core Logic said, there was no sign of it in housing data.

'Give it a month, and maybe we will see it,' he said. 'There's a bit of a lag.'

Already there could be an impact, but unlike sharemarkets, there was not 'daily' price for houses.

Instead, property-watchers have to wait for the release of aggregate sales data.

'There may be an impact on the ground,' Davidson said. 'But it's not there to see in any stats.'

Even when statistics were released, it was hard to unpick what had caused price movements.

Some markets might be more exposed than others, such as those more dependent on tourism, or foreign buyers, like Rotorua and Queenstown, Davidson said.

In China limits on human movement and interaction have brought property market sales and price-growth to a virtual halt.

YOUR DEBT, YOUR SAVING

'They say the best time to plant a tree is 20 years ago, and the second best time to plant a a tree is today,' said Hannah McQueen, founder of the EnableMe financial coaching business.

Economic disruption caused by coronavirus provided a moment for people to reflect on their finances, just as happened during the Global Financial Crisis of a decade ago.

'A good shake-up allows you to take stock of where you are at,' McQueen said.

Debt reduction and saving were the two things people should look at in their lives to build their financial resilience.

That included people creating a financial emergency plan, working out how they would cope, should their incomes be disrupted.